Types of Debt

When debts get out of hand and a person just can’t keep up, there are alternatives. Debt consolidation is one option that is available. This service is provided by credit counseling agencies. Using this method, an individual’s unsecured debts are consolidated into one monthly payment that is negotiated by the agency. The benefits of this include lower monthly payments and lower finance rates. Some late fees and penalties may also be cancelled. Bankruptcy is another option that is available. More information on that option is included below.

Individuals have the option to keep their secured property, such as their house or car, or to surrender them after filing a Chapter 7. If the person wants to keep the items, he or she will need to file an agreement that has negotiated and signed by both the individual and the creditor with the court. Most unsecure debt, such as credit cards, will no longer be owed once the case has been discharged.

A reaffirmation means that an individual can continue paying on those debts and can keep the asset. If, however, a default is made in the payments at a later date, the creditor can still foreclose, in the case of a home, or repossess, in the case of cars or other items. The decision to reaffirm should not be made without being sure that the payments can be made in a timely manner until the debt is paid in full.

Chapter 13 is known as an adjustment of debts. A person must have a regular income in order to qualify to file. A set amount is paid to the trustee of the court on the basis of how often the individual is paid. The trustee will then distribute the funds to the individual’s creditors. The amount to be paid will depend on the amount of debt owed and the individual’s income.

There are some obligations that cannot be discharged. These include child support, criminal fees, and some other types of debts. An attorney can be consulted for additional information on those types of debts.

At the end of a set period of time, a discharge is received, meaning that the individual no longer owes any debt except the secured loans that were reaffirmed or not surrendered, and a few exceptions that are not dischargeable. Certain debts, such as criminal fines, child support, student loans, and some others cannot be discharged and a person will continue to owe those debts after receiving a discharge. This can occur anywhere from thirty days, in a 7, or three to five years in the case of a 13.

A discharge cannot be received until an individual has completed a financial management course. The cost for this is anywhere from fifty to a hundred dollars. In most areas, the course can be completed by telephone, on the Internet, or in person. The courses must be taken from a provider who has been approved. A list can be obtained from the court. If a 7 is filed, another discharge cannot be obtained for eight years. In the case of a 13, the time period is six years.

Individuals should schedule an appointment with a credit counseling agency prior to filing bankruptcy. A certificate of completion must be filed with both a 7 and a 13. While there, debt consolidation and other alternatives can be discussed and decided upon. If those will not help the individual, they will have already met one requirement for filing and can then proceed to discuss the matter with an attorney.

Doyle Salewski Inc.’s team of seasoned Ottawa bankruptcy professionals helps individuals and families ease their debt load and keep their major assets.